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Aberdeen - A Field Of Promise – Whatever the Outcome Of Unconventional Oil & Gas

Aberdeen - A Field Of Promise – Whatever the Outcome Of Unconventional Oil & Gas

Fields of Promise

Whatever the energy mix looks like ten years from now, one can be optimistic that business in Aberdeen will continue as ‘a field of promise’ and remain at the forefront of the challenges and opportunities which lie ahead. 

I attended the Oil Council Assembly on Oilfield Development, in London at the end of June. As ever with Oil Council events, it was well organised and well attended, and afforded an opportunity to catch up with some old acquaintances, to meet some new ones, and to exchange views on the issues of the day. It was, I suppose, unsurprising that much importance was being afforded to unconventional hydrocarbons in the various discussions. This mirrors, perhaps for different reasons, the high profile afforded to unconventionals in the press and media over the last couple of years, particularly given the public controversy in relation to hydraulic fracturing or “fracking”.

The shale gas “revolution” across the Atlantic has undoubtedly helped re-vitalise the US economy, and has completely changed the security of power supply there, with the attendant potential to change global geo-politics. Much talk since this remarkable unfolding in the US, has been of the likely “roll out” of a similar shale gas revolution in Europe, China and other parts of the globe, with profound consequences. And it is true that while conventional production globally is forecast to fall by 0.6% per annum, production of unconventionals is set to increase by 5.5% per annum.

But there are many question marks over the timing, scale and consequences of any such trend, not to mention challenges over the sustainability of the US unconventionals “revolution”. And in the UK, while our government is putting in place incentives to support shale gas exploration and production, we are talking in all likelihood of a decade before there is anything significant in terms of scale of production.

What can be said though is that in geological terms, if not yet in commercial terms, the scale of “unconventional” oil & gas reserves and the potential impact of the development of them, is enormous. To take merely one of the unconventional hydrocarbons to make the point, namely oil shale (which is different from shale oil, and of course from shale gas, CBM and so on), there are more known reserves globally than the combined reserves of conventional and tight oil  -  one estimate is that there is the equivalent of one trillion barrels. So with some technological advances, these reserves could start to be unlocked in the next decade and could be near the front of unconventional development globally.

Which reminds me that the first exploitation of oil shale on an industrial scale took place here in Scotland during the 1860s by Young’s Paraffin Light and Mineral Oil Company. At its height it employed, directly and indirectly, through the whole supply chain (and from winning, distilling and product manufacturing), 40,000 people in Scotland. More than three million tons of shale were being turned out annually. By 1900 competition from conventional oil meant these halcyon days were numbered and a pretty steep decline followed.

All of which, I suppose, illustrates a few things, including the need to be ready to adapt in the face of change, but also the great historical tradition we have here in Scotland when it comes to the exploitation of natural resources. We have a community of scientists, engineers, geologists, investors and lenders, and also professional advisors, who for over 100 years have sought to be at the forefront of development in the energy industry. Aberdeen, per capita, may well have more oil & gas project management and project delivery skills than any other city. Scotland has an energy industry tradition and pedigree which considerably pre-dates the North Sea. So, whatever the energy mix looks like, ten years from now, I am confident Aberdeen will remain a dynamic‘field of promise’.

 
Robin Clarkson
Partner

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